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Weekly Global Update for January 20, 2016

4Q’15 Global Electronic Supply Chain Update

Here is an early update of 4Q’15 electronic supply chain performance:

World electronic equipment shipment growth was negative in 4Q’15 versus 4Q’14 when consolidated on both fluctuating and fixed exchange rate bases. At fluctuating exchange it was down 5.2% and at fixed exchange it declined 0.4% (Chart 1).

Worldwide semiconductor capital spending is projected to decline 4.7% in 2016, to $59.4 billion, according to Gartner, Inc. This is down from the 3.3% growth predicted in Gartner's previous quarter's forecast.

"The 2016 outlook for the semiconductor manufacturing equipment market reflects a bleaker outlook for end-user electronics demand and the world economic environment," said David Christensen, senior research analyst at Gartner. "Capital investment policies of leading semiconductor vendors have remained cautious against the background of sluggish electronics demand. However, the long-term outlook shows a return to growth, although the wafer-level manufacturing equipment market is expected to enter a gentle down cycle in 2016 due to the loss of the supply and demand balance in the DRAM market."

2016 spending on wafer-level manufacturing equipment is forecast to decline 2.4%. Within the forecast, different segments are expected to fare differently in response to varying end-market conditions. For example, the lithography segment will grow 1.4%, while the etch, clean and planarization equipment markets in 2016 are expected to decline by 2.9%. The deposition equipment segment will improve slightly in 2016 with negative 3.2% growth. Beyond 2016, the market turns positive, with relatively strong growth forecast through 2018.

Worldwide PC shipments totaled 75.7 million units in the fourth quarter of 2015, an 8.3% decline from the fourth quarter of 2014, according to preliminary results by Gartner, Inc. For the year, 2015 PC shipments totaled 288.7 million units, an 8% decline from 2014.

“The fourth quarter of 2015 marked the fifth consecutive quarter of worldwide PC shipment decline,” said Mikako Kitagawa, principal analyst at Gartner. “Holiday sales did not boost the overall PC shipments, hinting at changes to consumers’ PC purchase behavior. On the business side, Windows 10 generally received positive reviews, but as expected, Windows 10 migration was minor in the fourth quarter as many organizations were just starting their testing period.”

Gartner’s outlook for PC shipments in 2016 is for a decline of 1% compared with 2015, with the potential for a soft recovery in late 2016. Kitagawa said the PC market is still in the middle of structural change which will reduce the PC installed base in the next few years.

In the fourth quarter of 2015, Lenovo registered a worldwide PC shipment decline for the third consecutive quarter. However, Lenovo declined less than the industry average, and it extended its lead in the market. Lenovo accounted for 20.3% of worldwide PC shipments in the fourth quarter of 2015. Lenovo did particularly well in North America to offset shipment declines in EMEA, Latin America and Japan.

HP’s fourth quarter PC shipments declined in the worldwide market and across all regions. The decline in the regions were mostly the same or better than the regional average except for the U.S. market. The steep decline in the U.S. market was in part because of unusually high shipment volume in the fourth quarter of 2014, led by low-priced Bing notebooks targeting holiday sales.

Dell’s PC shipments declined across all regions except Japan where the company grew by single digits compared to the fourth quarter of 2014. Although Dell’s shipments declined in EMEA and the U.S., Dell declined less than the regional averages.

In the U.S., PC shipments totaled 16.9 million units in the fourth quarter of 2015, a 3.1% decline from the fourth quarter of 2014. Despite an 8.4% decline in shipments, HP maintained the number one position in the U.S., accounting for 27.1% of PC shipments in the fourth quarter of 2015. Dell continued to be the number two vendor in the U.S., as its shipments declined less than the industry average.

“Holiday sales had a limited impact on PC sales in the U.S. market,” Kitagawa said.

“Notebooks were off the top wish list of holiday gifts. Unlike 2014 holiday sales, there were not many holiday mega deals for laptops, especially in value segments. At the same time, consumers’ interest shifted to other consumer electronics devices such as TV’s and wearables. “
PC shipments in EMEA totaled 22.5 million units in the fourth quarter of 2015, a decline of 16% year-over-year. In Western Europe, some countries, such as the UK, showed solid Windows 10 promotions during the holiday season, and shipments in the French market remained good. Overall high inventory levels plagued Western Europe. In Eastern Europe, the PC market experienced modest growth in low-single digits, driven by consumer demand for new hybrid devices and PC replacements to move to Windows 10.

The Asia/Pacific PC market reached 26 million units in the fourth quarter of 2015, a 1.5% decline from the fourth quarter of 2014. Buyers did not rush to replace with newer PC models with Windows 10. PC vendors looked for profitability over shipment volume, focusing on segments such as gaming PCs; bundling of desktops with large monitor screens and ultramobile device models. Preliminary results indicate that the China PC market declined 4.7% in the fourth quarter of 2015 compared with a year ago.

For the year, worldwide PC shipments declined for the fourth consecutive year, which started in 2012 with the launch of tablets. “In 2015, local currency devaluation also played a key role in the market conditions,” Ms. Kitagawa said. “EMEA, Latin America and Japan faced a major impact from the devaluation, showing double-digit declines in 2015. In contrast, the U.S. and Asia/Pacific experienced minor declines of almost flat to low single-digit declines as the currency issue did not affect these regions.”

The top six vendors accounted for more of the overall PC market in 2015. These vendors accounted for 73.1% of shipments in 2015, up from 70.4% of shipments in 2014. Lenovo maintained the number one position, accounting for 19.8% of PC shipments, followed by HP with 18.2% market share. Dell rounded out the top three vendors, accounting for 13.6% of shipments.

Notes: Data includes desk-based PCs, notebook PCs, and ultramobile premium. All data is estimated based on a preliminary study. Final estimates will be subject to change. The statistics are based on shipments selling into channels.

Walt D. Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website.